Angus Geddes, Fat Prophets
QBE Insurance Group (QBE)
Rising premiums and bond yields should lift investment income. Andrew Horton was recently appointed group chief executive. Horton has a fine track record at UK insurer Beazley PLC after 13 years as CEO. Horton is expected to start at QBE on September 1. Also, in my view, re-insurance will mitigate the finanical impact in relation to pandemic related claims.
Western Areas (WSA)
The nickel miner is well leveraged to stronger demand for commodities. WSA is raising $100 million at $2.15 a share to fund the development of its Odysseus underground mine and several exploration assets. I believe growing demand for nickel in the years ahead will be underpinned by the electric vehicle market. Odysseus is on schedule to produce by the middle of the 2023 financial year.
Mainstream Group Holdings (MAI)
This fund administrator has received a takeover offer at $1.20 a share from Hong Kong-headquartered financial services group Vistra. Mainstream’s board intends to support the scheme of arrangement. The offer is equivalent to 17.4 times fiscal year 2021 earnings guidance, but, in my view, undervalues Mainstream’s underlying business given a strong client pipeline in the US. Mainstream is free to solicit competing proposals until April 11, 2021. If no other bidder emerges, then Vistra will proceed to buy Mainstream at $1.20 a share.
BHP Group (BHP)
The global miner released a strong 2021 interim result. Iron ore operations perfomed well, and the company generated strong cash flow. An already strong balance sheet was enhanced with a cut in debt. The company declared a record dividend of $US1.01 a share. The shares were recently trading around record highs, so, in my view, should only be bought on weakness.
Vocus Group (VOC)
This specialist fibre and network solutions provider has entered a scheme implementation deed with a consortium consisting of Macquarie Infrastructure and Real Assets and Aware Super. The scheme has been endorsed by the Vocus board in the absence of a superior offer. While a superior rival offer for VOC is possible, I believe the consortium price of $5.50 a share is likely to succeed. Investors can consider selling now and moving on to other opportunities. The shares finished at $5.42 on March 11.
With light at the end of the COVID-19 tunnel, and with bond rates rising, the technology sector has been caught in a rotation from new to old economy stocks. This buy now, pay later stock is one that’s significantly down since its February highs. Expect competition in the buy now, pay later space to instensify. US payments giant PayPal has announced it will make its new Pay in 4 instalment option available to its 9 million Australian customers in early June.
Peter Moran, Wilsons
ReadyTech Holdings (RDY)
Provides cloud-based software to businesses and educators. RDY has a successful track record and generates much recurring revenue and solid margins. RDY will soon complete the purchase of Open Office, a software provider to local government and the legal sector. Open Office provides an additional growth stream. We retain an overweight rating.
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ResMed Inc. (RMD)
RMD makes medical devices and software to treat chronic respiratory diseases. We expect its core sleep apnoea treatment business to recover as the impact from COVID-19 subsides. ResMed software analyses data from its medical devices. This enables a better outcome for patients and health providers and is contributing to RMD gaining market share. We retain an overweight rating.
This accounting software company recently announced the acquisition of Planday, a Danish software provider for rostering and managing staff. The acquisition appeals as it broadens the service offering to Xero clients. XRO is a well managed business with an impressive growth record, which is reflected in the share price. We retain a market weight rating.
SILK Laser Australia (SLA)
SLA clinics offer laser hair removal, cosmetic injectables, body contouring and skin treatments. SILK’s recent result, the first since listing on the ASX in December 2020, showed impressive growth in revenue and profitability. This reflects industry growth and improving profitability at existing clinics. The shares appear appropriately priced following a rise post the results. We retain a market weight rating.
NAN makes the trophon EPR ultrasound probe disinfector. The share price has fallen from $8.25 on January 4 to close at $5.84 on March 11. Sales are likely to recover from COVID-19 impacted levels, but it will take time. The timing for the release of a new device remains unclear. We retain an underweight rating.
Mayne Pharma Group (MYX)
The pharmaceutical company reported a disappointing first half result, with underlying EBITDA down by 16 per cent to $39.9 million. This was below our expectations and highlights a competitive pharmaceutical environment. While the speciality division should improve in response to launching new products, we expect the generics business to remain under pressure. We retain an underweight rating.
Ron Shamgar, Tamim Asset Management
EML Payments (EML)
This payment solutions provider reported a strong first half result. It revealed the resilience and diversified nature of the business. The company is on track to process about $20 billion in transactions this year. The new business pipeline is estimated at $8 billion a year. Investors are now pricing EML as a re-loadable payments company rather than a gift card firm. Our valuation increases to $6.50 a share.
Resimac Group (RMC)
This leading mortgage originator delivered a record first half net profit after tax of $50.5 million. It guided to a full year profit range of between $100 million and $105 million, an increase of between 80 per cent and 90 per cent on last year. We believe the shares are under valued for a growth company recently trading on an undemanding price/earnings multiple of about 8 times and a 2.5 per cent dividend yield. We value RMC at $3.50 a share.
IFM is a leading global software provider to the automotive sector. The company maintained first half revenue of $47.7 million in fiscal year 2021. Net profit after tax was up 3 per cent to $9.3 million. We expect IFM to benefit from global economies re-opening, and anticipate any future acquisitions will be earnings accretive. In the meantime, the dividend yield was recently about 3 per cent.
NXL is a forensic software and data analytics provider to governments and global enterprises. NXL is exposed to the $37 billion cyber security market. The stock was down about 50 per cent from recent highs. In our view, first half results were marginally weaker than expected. But software as a service revenue is attractive and NXL is worth watching for a buying opportunity.
The share price of this buy now, pay later company at March 11 is down significantly from recent highs. We like the longer term prospects of the buy now, pay later industry, but see further downside in the short term. We believe an opportunity to buy APT at more attractive levels will present in coming weeks or months.
Audio Pixels Holdings (AKP)
The company is involved in digital loudspeaker technology. The company reported revenue of $191,434 for the year ending December 31, 2020. It reported a net loss after tax of more than $12 million. We believe the stock is over priced.
The above recommendations are general advice and don’t take into account any individual’s objectives, financial situation or needs. Investors are advised to seek their own professional advice before investing. Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.